- Net revenue of $9.4 million
– an increase of 15% over Q1 2020 and 79% over Q2 2019
- Achieved 68% Ontario
retail market share in the concentrates category, including
first-to-market shatter by Fireside™ X
- Entered product supply and clinical services agreements
with Medical Cannabis by Shoppers™
- Canna Farms™ is the fourth most recognized cannabis
brand, according to recent Brightfield Group independent survey
- Largest export shipment to Australia occurred during the
quarter
TORONTO, Aug. 14, 2020 /CNW/ - VIVO Cannabis
Inc. (TSX: VIVO) (OTCQX: VVCIF) ("VIVO" or
the "Company") today released its second
quarter 2020 financial and operating results.
Management Commentary
"This is our fifth consecutive quarter of sequential sales
growth. We are pleased with our quarterly results, with Q2 2020
sales increasing 79% over the prior year quarter, while sales,
general and administrative expenses decreased 18% over the same
period," said Barry Fishman, CEO of
VIVO. "Notable achievements include the expansion of our leadership
position in the concentrates category across several provinces, the
introduction of a first-to-market shatter by Fireside™
X, and the naming of Canna Farms™ as the fourth most
recognized cannabis brand among Canadian cannabis consumers in a
recent Brightfield Group survey. We also advanced several key
medical cannabis initiatives in order to position the business for
future success, including entering into product supply and clinical
services agreements with Medical Cannabis by Shoppers™."
Financial Summary
Gross and net revenue for Q2 2020 were $12.7 million and $9.4 million, respectively. On a net basis this
represents a 15% increase quarter-over-quarter as compared to Q1
2020, driven largely by successful sales of VIVO's Cannabis 2.0
products. When compared to Q2 2019, net revenue grew by
approximately 79%.
Concentrates made up over half of VIVO's cannabis sales revenue
during the quarter, a testament to the Company's strategic decision
to be a leader in that space. This was offset by lower flower
sales, resulting from decreased market demand in the wake of the
COVID-19 pandemic.
VIVO continued to sustain top-tier prices for its medical and
adult-use dry flower products, with a net average selling price
(net of excise) of $6.07 per
gram in Q2 2020.
The Company purchased third-party extraction inputs in Q2 2020.
The internal extraction suite at its Vanluven facility is now able
to provide these inputs and VIVO expects the gross margin on its
vape and extract products will improve significantly.
Sales, general and administrative expenses were $4.7 million in Q2 2020, compared to $5.5 million in the first quarter, a reduction of
15%.
The Company's adjusted EBITDA(1) was
($2.2) million for the quarter, an
improvement of $0.4 million over the
first quarter of 2020. VIVO's Q2 2020 adjusted EBITDA(1)
derived from Domestic Cannabis Operations was ($1.8) million. The additional
($0.4) million of adjusted
EBITDA(1) in the quarter was related to Growth
Initiatives (International Operations and New Product
Development), which represent current investments that are expected
to drive future profitable sales beyond 2020.
VIVO continues to maintain a healthy balance sheet through
prudent management of operational expenses and a measured approach
to capital expenditures. During Q2 2020, VIVO repurchased certain
of its outstanding 6% unsecured convertible debentures in the
aggregate principal amount of $10.9 million, for a discounted
purchase price of $10.1 million (plus accrued and unpaid
interest), leaving remaining debentures in the aggregate principal
amount of $27.1 million outstanding. As a result, the
Company will save approximately $1.35 million in interest
and principal. Cash and cash equivalents (including short term
investments but excluding strategic equity investments) as at
June 30, 2020 were $22.2 million.
Key Performance Indicators
KPI
(P&L amounts in millions)
|
Q2
2020
|
Quarter-over-
Quarter Change
|
Q1
2020
|
Gross
Revenue
|
$12.7
|
11%
|
$11.5
|
Net
Revenue
|
$9.4
|
15%
|
$8.2
|
SG&A
|
$4.7
|
(15%)
|
$5.5
|
Adjusted EBITDA
(1)
|
($2.2)
|
15%
|
($2.6)
|
Cash and
equivalents
|
$22.2
|
(37%)
|
$35.2
|
Active patients
(2)
|
25,500
|
19%
|
21,444
|
Net flower price
per gram
|
$6.07
|
(9%)
|
$6.67
|
Product
formats
|
8
|
14%
|
7
|
|
|
(1)
|
Adjusted EBITDA is
not a measure of financial performance under IFRS. For the
Company's definition of Adjusted EBITDA, see the Company's
management's discussion and analysis for the three and six months
ended June 30, 2020, available under the Company's profile at
www.sedar.com.
|
(2)
|
Represents active
patients (as of the end of the quarter) who purchase medical
cannabis directly from the Company, including new temporary
six-month extensions post March 13, 2020 based on Health
Canada's amendment due to COVID-19.
|
Business Update
VIVO remains focused on executing against its four strategic
priorities. In the first half of 2020, the Company has made
significant progress in enhancing supply and production
capabilities, expanding its customer network, increasing product
innovation and accelerating its international medical business.
VIVO believes that focusing on these four priorities will generate
long-term shareholder value and accelerate the path to
profitability.
1. Enhance Supply and
Production Capabilities
VIVO continues to adhere to a measured and disciplined approach
to capacity expansion and production capabilities by ensuring
initiatives pursued are cost effective and will be capable of
meeting growing patient and consumer demand.
- Canna Farms' 10,000 square foot Phase 5 expansion received all
necessary Health Canada approvals in the quarter. Operational rooms
are being fully utilized for storage and processing, and planting
has commenced in the cultivation areas, using a two-tiered growing
system.
- Commissioning of the Vanluven facility's ethanol extraction
suite is complete and commercial production is underway. The
resulting high quality, low production-cost resins and distillates
will be used as inputs for VIVO's oils, vape cartridges, and other
Cannabis 2.0 products, such as the first Canadian-launched shatter
by Fireside™ X.
- Following planting in the first quarter of 2020, the seasonal
airhouses at the Kimmetts facility now contain over 10,000 healthy
plants, most of them over seven feet tall.
2. Create a Broad and Loyal
Customer Network
VIVO has a strong portfolio of brands in both the medical and
adult-use markets. Its Canna Farms™ brand is one of the leading
brands in the industry, known for producing award-winning, BC
indoor-grown, craft cannabis flower and newly launched solvent-less
extracts and edibles.
- VIVO continued to maintain top-tier net pricing of $6.07 per gram of dry flower and implemented some
price reductions to stay competitive within the premium market
segment.
- VIVO entered into a product supply agreement and a clinic
services agreement with Medical Cannabis by Shoppers™. Under the
terms of the supply agreement, VIVO's licensed producers will offer
a broad portfolio of Canna Farms™ and Beacon Medical™ branded
medical cannabis products through the Medical Cannabis by Shoppers™
online sales platform to patients across Canada, including its latest Cannabis 2.0
offerings such as chocolates and extracts. Under the terms of the
clinic services agreement, VIVO's subsidiary, Harvest Medicine,
will provide cannabis education services to patients who are
appropriate candidates for cannabinoid-based products and provide
consulting services to the Medical Cannabis by Shoppers™ Cannabis
Care team.
- VIVO entered into a collaboration agreement with Veterans'
House ("Veterans' House"), under which the Company
will provide sponsorship and support to joint programs for Canadian
Armed Forces veterans. Veterans' House is a federally registered
non-profit organization that provides veterans suffering from
mental illness and operational stress injuries, such as
post-traumatic stress disorder, access to counseling and peer
support programs.
- In Q2 2020, VIVO began shipping products under its Canadian
Bud Collection™, brand, which
launched in Q1 2020 and is directed at the popular value segment of
the market.
- After temporarily realigning Harvest Medicine's resources to
provide patient-focused services through its telemedicine platform,
HMED Connect, at the outset of the COVID-19 pandemic,
Harvest Medicine clinics are now "patient ready", with precautions
in place to accommodate walk-in patients and help stop the spread
of COVID-19, while continuing to offer patients online options to
receive services.
3. Build an
Innovation-Driven Branded Organization
VIVO has a strong commitment to pursuing innovation throughout
its value chain. The Company is also using its robust data insights
as a foundation for the development of novel products with a strong
competitive edge and high margins.
- During Q2 2020, VIVO made initial shipments of its Fireside X
shatter product to several provincial wholesalers, including in
British Columbia, where the
provincial wholesaler sold its entire purchase within the first
week. This is the fifth significant concentrates product format
launched by VIVO, following Fireside vape cartridges, and Canna
Farms' bubble hash, kief and live rosin.
- This month VIVO introduced Beacon Medical softgel capsules,
available through its Canna Farms on-line medical marketplace.
Beacon softgel capsules provide patients with a convenient format
to ingest cannabis in a precise-dosed format, increasing choice for
the Company's more than 25,000 registered patients.
- Subsequent to the signing of an exclusive agreement with
Vertosa Inc., an infusion technology company based in Oakland, California, for Canadian production
rights, Vertosa's equipment has been installed at the Vanluven
facility. VIVO expects to begin production of active emulsions
using this technology for the cannabis beverage market in the
coming months.
- VIVO advanced into the next stage of product development with
partner, Pharmascience Inc., a global pharmaceutical company based
in Montreal, Quebec, for a unique
line of specific medical cannabis formulations produced under
pharmaceutical quality standards. VIVO believes that a significant
catalyst to increased medical cannabis use is the introduction of
new medical-grade, precise-dosed, stable formulations, which the
partnership with Pharmascience is intended to target. The first
products from this partnership are expected to be introduced in the
Canadian market by the end of Q1 2021.
4. Accelerate International
Medical Business Growth
VIVO continues to pursue its international expansion strategy,
leveraging its experience and leadership to enter new high-growth
markets. The Company's initial focus is on the German and
Australian markets, which, combined, have a population of over 100
million people.
- VIVO's Australian business continues to rapidly advance,
achieving record sales in Q2 2020. Australia's Therapeutics Goods Administrator
(TGA) reported a record number of new patient approvals in July of
2020 and triple digit growth in patient approvals year over year.
VIVO is well positioned to capitalize on this rapidly growing
market.
- VIVO continued to advance its European expansion strategy
through its partnership with Linneo Health, a Spanish-based EU-GMP
certified supplier of pharma-grade cannabis. VIVO's subsidiary,
Beacon Medical Germany, is expecting final approval of Linneo
product for import to Germany in
late 2020.
- Beacon Medical Germany was granted a narcotics licence in
Germany, and is awaiting receipt
of an import licence, the final permit necessary to facilitate
imports from VIVO's Vanluven facility and from other non-EU
sources. EU-GMP certification of VIVO's Vanluven Facility continues
to advance, with a follow-up audit having recently been completed.
The follow-up audit is an important step towards EU
GMP-certification and is a requirement to import medical cannabis
products from Canada for sale in
Germany and other European
countries.
COVID-19 Update
VIVO continues to monitor COVID-19 developments and has
implemented enhanced personal safety and sanitation protocols.
VIVO's production facilities are continuing operations and, to the
Company's knowledge, there have been no confirmed cases of COVID-19
among Company personnel. The Napanee and Hope facilities have extended
hours and staggered shifts to facilitate physical distancing and
ensure a safe work environment.
Q2 2020 Results Conference Call and Webcast
DATE:
|
Monday, August 17,
2020
|
TIME:
|
11:00 a.m.
ET
|
DIAL-IN
NUMBER:
|
647-427-7450 or
1-888-231-8191
|
CONFERENCE
ID:
|
8762205
|
LIVE
WEBCAST:
|
https://bit.ly/31UGPPP
|
About VIVO Cannabis™
VIVO Cannabis™ is recognized for trusted, premium cannabis
products and services. It holds production and sales licences from
Health Canada and operates world-class indoor and seasonal airhouse
cultivation facilities with proprietary plant-growing technology
in Hope, British Columbia
and Napanee, Ontario. VIVO
has a collection of premium brands, each targeting different
customer segments, including Canna Farms™, Beacon Medical™,
Fireside™, Fireside-X™, Lumina™ and Canadian Bud Collection™.
The Company is expanding its production capabilities and
distribution network. Harvest Medicine, VIVO's patient-centric,
scalable network of medical cannabis clinics, has serviced over
100,000 patient visits. VIVO is pursuing several partnership and
product development opportunities and is focusing its international
efforts on Germany and
Australia. The Company has a
healthy balance sheet and is well-positioned to accelerate its path
to profitability. For more information
visit: www.vivocannabis.com.
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Disclaimer for Forward-Looking Information
All dollar amounts in this news release are in Canadian
dollars. Certain statements in this news release are
forward-looking statements, which are statements that are not
purely historical, including statements regarding the beliefs,
plans, expectations or intentions of VIVO and its management
regarding the future. Forward-looking statements in this news
release include statements regarding: the Company's expected
catalysts to deliver profitable growth, including entry into
international markets and the development and launch of innovative
products and services, and the financial impact thereof; the
Company's expectation that focusing on its four strategic
priorities will generate long-term shareholder value and accelerate
the path to profitability; the factors that VIVO believes will
drive significant growth in medical cannabis utilization; the
ability of the Company's growth initiatives to drive future
profitable sales beyond 2020; the expected timing of
shipment of active emulsions from the Vanluven facility; that
certain products offered by the Company will be sold through
the Medical Cannabis by Shoppers™ platform;
that the products generated from the Company's
partnership with Pharmascience Inc. are intended to maximize
therapeutic benefit to patients; and, the expected timing of the
introduction of Linneo products for import to Germany. Such statements are subject to risks
and uncertainties that may cause actual results, performance or
developments to differ materially from those contained in the
forward-looking statements, including: that the medical cannabis
market may not grow to the extent, within the time, or for the
reasons expected by the Company; that the COVID-19 pandemic may
last longer and have a more significant impact on the Company's
operations, the Canadian cannabis industry, or the global economy
generally, than currently expected; that the Company faces
competition against new market entrants and participants; that the
Company may not be able to launch new products in the time expected
or at all and that patients may not receive the expected benefits
therefrom; that the Company may not be able to achieve competitive
margins; that new products, if launched, may not be accepted by the
market or may become subject to product liability claims; that the
Company may not be able to obtain necessary licences; that demand
for the Company's products may not meet management's expectations;
that the timing of EU-GMP certification may be delayed due to
travel restrictions related to the COVID-19 pandemic or otherwise;
that the Company may be unable to retain its key talent; that the
Company may not be able to execute on its strategic partnerships;
that the Company may not obtain any other necessary regulatory
approvals as required from time to time; that the Company may be
unable to protect its intellectual property; and other factors
beyond the Company's control. No assurance can be given that any of
the events anticipated by the forward-looking statements will occur
or, if they do occur, what benefits the Company will obtain from
them. Readers are urged to consider these factors carefully, and
the more extensive risk factors included in the Company's
management's discussion and analysis for the three and six months
ended June 30, 2020, which is
available on SEDAR, in evaluating the forward-looking statements
contained in this news release, and are cautioned not to place
undue reliance on such forward-looking statements, which are
qualified in their entirety by these cautionary statements. The
forward-looking statements in this news release are made as of the
date hereof and the Company disclaims any intent or obligation to
update publicly any such forward-looking statements, whether as a
result of new information, future events or results or otherwise,
except as required by applicable securities laws.
SOURCE VIVO Cannabis Inc.